A genomic clone encoding the protease and the assembly protein of Kaposi's sarcoma-associated herpesvirus (KSHV, also called human herpesvirus 8) has been isolated and sequenced. As with other herpesviruses, the protease and assembly protein coding regions are present within a single long open reading frame. The mature KSHV protease and assembly protein polypeptides are predicted to contain 230 and 283 residues, respectively. The amino acid sequence of KSHV protease shares 56% identity with that of herpesvirus saimiri, the most similar virus by phylogenetic comparison. The protease is expressed in infected human cells as a late viral gene product as suggested by RNA analysis of KSHV-infected BCBL-1 cells. Expression of the protease domain in Eschericia coli yields an enzymatically active protease, as determined by cleavage of a synthetic peptide substrate, while an active-site mutant of this same domain yields minimal proteolytic activity. We also expressed the KSHV protease and the assembly protein in rabbit reticulocyte lysates, and optimized the expression levels. This system will enable us to show the activity of the protease on its native substrate, the assembly protein. Sequence comparisons with human cytomegalovirus (HCMV) protease permitted the identification of the catalytic residues, Ser132, His63 and His157, based on the known structure of the HCMV enzyme. The amino acid sequence of the release site of KSHV protease (Tyr-Leu-Lys-Ala*Ser-Leu-Ile-Pro) and the maturation site (Arg-Leu-Glu-Ala*Ser-Ser-Arg-Ser) show that the extended substrate binding pocket differs from that of other members of the family. The conservation of amino acids known to be involved in the dimer interface region of HCMV protease suggests that the KSHV protease is likely to be a dimer. These features of the viral protease provide opportunities to develop specific inhibitors of its enzymatic activity using computer assisted methods.